As BitCoin Touches $400 The Senate Starts Seeking Answers... As Does The Fed

So as more and more pile into the electronic currency, some due to ideological reasons, some simply to chase momentum, some out of disappointment with the manipulated gold price looking to park their savings in an alternative, non-fiat based currency, which a year ago traded 40 times lower, the attention of the government is finally starting to shift to what has been the best performing asset class in the past year, outperforming even the infamous Caracas stock market.

The U.S. Senate Committee on Homeland Security and Governmental Affairs will meet on Nov. 18 “to explore potential promises and risks related to virtual currency for the federal government and society at large,” it said in a statement today.

“Bitcoin is obviously getting a lot of attention from the federal
government on the regulatory side,” Nicholas Colas, an analyst at ConvergEx Group, said in an interview. “Given the involvement of the currency in illegal activities, that is entirely warranted. I expect these hearings to be largely informational, which is good for Bitcoin.”

“The architecture of the system is elegant from a computer-science perspective, but hard for a non-tech person to understand,” Colas said. “Getting industry professionals to close this gap will be very helpful.”

Or not. Because the only thing the government does when its interest is piqued by something, anything, especially things that have to be looked in log-scale, is to promptly regulate it and then tax it, not necessarily in that order. Just how it will achieve this with Bitcoin remains unclear but one thing is certain: it will try.

Especially, now that even the Fed is looking at BitCoin when a few days ago the Chicago Fed issued 'Bitcoin: A primer" in which the Fed states quite simply:

So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable.

Finally, while the Fed may be late to the game, the ECB has already made its feelings on BitCoin well-known long ago: recall from over a year ago: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows" in which the European central banks didn't mince its words: BitCoin is nothing but a ponzi scheme to the central bank tasked with preserving the viability of an entire insolvent continent, and a a currency which unlike BitCoin would never survive absent regulatory intervention.

So while the electronic currency is soaring exponentially as it goes through its appreciation golden age, will the one thing that can finally end the dream of BitCoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously.

Comment viewing options

Anything in competition to the USD, or even nations seeking to settle in something other than USD, are terrorists and labeled humanitarian violators. Gold, silver, Bitcoin.... will all be managed by the war mongers.

I'd just simply prefer to hold it in my hand, on the butt end side of my shotgun.....

Rally around our new currency and our hero Satoshi! This is the strategy as was relayed to me.... use the power of virtualization (Bitcoin) to induce panic into global fiat currencies. Stand on the other side as well holding physical assets. This is how we fight our enemy, the nemesis of freedom, liberty and God using both virtualization and real, physical assets.

If you stand on the side of corrupt crony-capitalism and genocide by all means hold your Federal Reserve Notes tight. May you choke on them and die a meaningless death.

If you stand for liberty, freedom and justice for all rally around the mighty Bitcoin. Watch as we take one battle after another. Some chose to make their mark in this world by grabbing a gun and killing some peon in an airport. Meaningless! We can do better and defund the entire war machine!

I remember watching as the talking heads would gloat back in 2002 during "shock and awe" as thousands of innocent civilians were massacred using "smart bombs" (most of whom did not support Hussein). I remember asking myself if there was any justice in this world for these tyrants?

We have these bastards on the run! No surrender and no retreat! Bitcoin to $1,000, Bitcoin to $10,000, Bitcoin to $1,000,000 and Bitcoin until we break them and put them on trial!

Not to worry....bytes 17-34 of each bitcoin signature says it is redeemable in a fixed quantity of gold, 1 gal of oil (courtesy of the US/Saudi mutual self-defense and extortion treaty), or 1 oz of low-radiation flounder.

It is definitely neither a ponzi sheme nor currency with no intrinsic value.

I admire your enthusiasm fs, your goals are outstanding but I think the platform you are using to achieve those goals will not work. I hope you aren't all in. This money seems very volatile on a Saturday evening, going up and down like a yo-yo. I think I will continue to save my profits in something I can touch.

Well I am definitely not "all in" on Bitcoin and as I stated above I only view it as part of my portfolio. It may be the first crypto-currency on Earth but I do not know yet if it is the one that survives. What I do know is that Bitcoin is the most revolutionary and advanced currency in human history.

I refuse to try to save in fiat. Screw that. I saw what happened to my grandparents' and parents' savings so I drained my 401B and sold my house. I drained my bank account shortly thereafter and bought small, valuable stuff that has more than doubled in value since then. I saw my grandparent's and parent's savings dwindle to next to valueless over the past 50 years. My 82-year-old mother is concerned that there won't be anything left to leave my sisters and me when she dies, but I told her that was the point and inflation was engineered deliberately in part to accomplish just that. My grandparents were small business owners and well-to-do by '50s standards. They had what was considerabled a respectable amount put by, but there was barely enough left to bury her by the time my grandmother died and she was only in the nursing home for a few months.

It is hard to see how Bitcoin can avoid being targeted by increasingly hungry and control-freakish governments, not to mention ISPs and other vested interests. The problem with artificial scarcity is that it's artificial: the same types who manipulate energy supply and old money will jump all over this. It's a psychopath's dream. "Now you have it; now you don't."

You're right, Knukles. Any investigative body with the words "homeland security" in its name means be prepared to be seperated by whatever item you have chosen to invest in other that fiat currency. Wall Street....I mean Washington DC, will have its cut if not all of it.

Good Morning RSloane. This remains the reason I am watching bitcoin from the sidelines. I will believe it is the real deal when Uncle Sam declares all out war on it and starts throwing people in jail. As long as it is a cool crypto currency for the millenials I am uninterested. The day those millenials are labeled terrorists and get in the cross hairs of every agency of every country, I will warm up to it being the real deal.

Good morning Fonz. Happy Sunday. I think what alarms the gov't the most is that the existence of bitcoins is a clear signal that people have little faith in their manufactured and debased currency. For the very same reason, downward pressure on precious metals will continue. I agree with you though, people are going to fall into the crosshairs and be branded as traitors, or terrorists, or whatever the perjorative du jour is. In the meantime, our cousins to our North now have bitcoin ATMs. Of course our government may "allow" their existence for the purposes of taxing the hell out of them.

With government survelliance of the Internet, don't you suppose that the addresses ARE tied to relatively specific individuals? I mean, seriously, as soon as you submit a transaction or even look at your balance from IP address X, the gov't knows that transaction was belonging to IP adddress X (maybe even MAC address), and then they just look at email logs or ISP records until they know who was at IP address X at that time.

Unless you do all of your Bitcoin operations under a public Internet access point (the public library, public WiFi hotspots in stores, etc) with lots of other people doing their own Bitcoin operations and NEVER at home, the gov't is watching and already knows what you've got regarding Bitcoin.

Why be rich in NYC metro anymore? Go to the mall, get shot at, go ice skating in Bryant Park, get shot at. Cruise up the west side in your range rover on a sunday afternoon........

and they just got Diblasio. The city is toast.

Hey I had asked you a question the other day re: equities. not sure if you saw it. I had a thought for you that I can't get into on here. If you are interested send me an email at fonzyfonzanoon@yaho.com.

Bitcoins effectively provide a means to transfer relative value during financial transactions – BTC can serve as currency. But to invest value in BTC for long periods of time may be risky. Crypto-currencies (CC’s) are an upcoming wave for mankind and will serve an important role in freeing society from excessive government control, but I believe CC’s will serve fundamentally as a transaction medium, not as a store of value. In other words, as technology changes continuously over time, so too will CC’s, and therefore some CC’s will rise in relative value while others are falling. The bigger-picture objective will be for citizens to keep their savings invested in entities that have a long-term history of holding value (or growth in value). If you trade value for CC’s and hold onto the CC’s for long term, you’re simply speculating.

Right now, Bitcoins are traded relative to U.S. Dollars and other fiats, and people evaluate BTC value relative to U.S. Dollars. Someday, BTC and other CC’s will be traded relative to other benchmarks – you can count on that. For now, however, there remains a fundamental problem when Bitcoins are tradable for USD’s, and here it is in a nutshell: The fact that USD’s may be created out of thin air and traded for BTC’s, means that the entity creating USD’s may unduly influence the value of BTC. If I were the Fed, and I wanted to destroy confidence in BTC, I would simply trade USD’s for BTC in an erratic manner. I’d buy BTC steadily for a period of time, thereby purposely creating a parabolic ramp upwards, and then sell them suddenly, thereby slamming the price downward dramatically. As long as people are willing to actively trade BTC for USD, the Fed could continue that process for as long as desired, thereby wreaking havoc with confidence in BTC. In order to be widely used and accepted, BTC needs to stabilize, and the Fed probably won't allow that. Yes, the Fed must be willing to lose USD’s overall in that scheme, but that’s trivial since the overall cost of the manipulation is relatively low and the Fed may create USD’s with simple keystrokes on a computer.

Someday, when the USD fails and is replaced by another benchmark (e.g., gold), the manipulation of BTC value will be much more difficult/costly. In other words, the manipulators will need to trade gold for BTC, and that will be a game changer.

I’d buy BTC steadily for a period of time, thereby purposely creating a
parabolic ramp upwards, and then sell them suddenly, thereby slamming
the price downward dramatically. As long as people are willing to
actively trade BTC for USD, the Fed could continue that process for as
long as desired, thereby wreaking havoc with confidence in BTC.

And each time it raises more awareness and BTC rises to a new all time high from the previous pump and dump. Gee, sounds like that strategy works about as well as QE. Do something that helps you in the short term and hurts you long term.

Great analysis, thank you. People, BTC is not a store of value. It is an ultra convenient and anonymous currency in its early infancy. While it should ultimately prove more stable than bennybux and ruppees, in the short term it is going to experience crazy volitility, not the least because of what PathForward mentioned above. It will settle down eventually but for the near future it's going to be a wild ride. Big opportunity for those who like to play dangerous games with big potential. It is the future though... a future one step closer to freedom from insane state actors and all their attendent ills.

Yea, it's anonymous until everyone's in it, then .gov confiscates all blockchains that engaged in transactions in the US. Why? You didn't pay your transaction tax. To get your Bitcoin back you must prove that it's yours.

Hey if you are gonna have an opinion could you at least make an attempt to make sure it's not based on complete bullshit before you spew it all into the comments? There are bitcoin skeptics in this thread who are asking legitimate questions as opposed to just making up nonsensical disinfo and pretending like they did the research.

Bitcoin to $1,000, Bitcoin to $10,000, Bitcoin to $1,000,000 and Bitcoin until we break them and put them on trial!

Read an article recently that the cost to mine Bitcoins is increasing as the required compute power (and thus the cost of the computers to do the work) has been growing rapidly. In other words, the input cost to mine the Bitcoin is increasing.

This equates to human productive effort in one form or another, which comes down to energy required.

Thus

It's about preserving one's productive efforts at fair value for those efforts. Bitcoin will find its equilibrium (notwithstanding other influences) relative to other stores of value.

Would be interesting to know, in the above-described energy perspective, what the equilibrium value of Bitcoin to gold is.

Perhaps that's exactly what's happening: an equalizing of mining the two, relative to the available supply on hand (and any extraneous risks?).

Scalability is a genuine issue facing the blockchain. I believe as the price of Bitcoin increases, that in itself may help mitigate some of the scalibility issues (or perhaps not as it is divisible down to eight decimal places).

There may come about a way of truncating the blockchain for smaller transactions as well.

central clearing is antithetical to the bitcoin design and antifragile philosophy. instead, the blockchain will be distributed redundantly, so that no computer needs to store more than a tiny fraction of the whole, and a relatively small number of computers will suffice to reproduce the entire blockchain. however, this won't happen for a couple of years yet.

I hope the bitcoin central clearing house is located in israel, it's the most safest place for it, no? They have nukes and lots of einsteins. After a while they can sell the transactional data to taxing authorities around the globe and seize bitcoins from those who do not obey.

OMG, yes the code can and will be changed, that is the entire point. It can adapt if necessary. Thing is everyone has to adopt your changes. You can't go in and just set up QE infinity and expect everyone to jump on board. Unlike fiat, it is a system based on participation not force. People have already tried to fork bitcoin into unlimited coins edition and failed. I am sure they will try again in the future and fail some more. I can print my own dildo dollars and claim them to be compatible with USD but will anyone listen to me if I don't hold a gun to their head? Thing is if the day does come that somehow everyone goes full retard and mutually agrees to remove the bitcoin limit then there will obviously be plenty of fools around allowing you to get out of the system.

heheheh, in the year 2140, ZH headline "btc mines closing we'll change the code, that motherfucker satoshi how he could knew how much bitcoins would be nedded, we need to stimulate economy, add more 50 million bitcoins"

Bitcoin could handle all of VISA's 2000 transactions per second today with no modification. It is currently no where near this number and by the time it gets there it will be able to handle much more than that.

Which wasn't my point at all, my point was that it isn't secure and people shouldn't trust it because they assume it is secure. If they are going to trust it they should trust it for the real reasons, which is that it's a limited availability currency that is not directly controlled by a central issuing "authority".

The same reason why gold and silver are trusted.

Running around saying it's to be trusted because it's secure only opens the logical loop-holes in that fallacy within it's history of issues, and the obvious fact that it requires the internet to function. Which means counterparty risk of it's main competitor, the government. So it's obvious that security is not the real reason why people are interested in it, or even using it.

No. That would be impossible to find out. The Blockchain does contain every transaction, from some address x to some address y, but doesn't say what the transaction was for or who made the transaction. I can be sending a transaction to my other address, or to a stripper for services rendered, or to somebody I am purchasing fiat currency from. None of that extra data is stored in the blockchain. Running on Bing running around here seems to think the Guv gots that all figured out but that's just crap.

Hey Wahooo. The Hound from tel aviv is running around telling everyone that bitcoin has been adopted by all world governments and bitcoin will never change the way it works or operates. The world governments have agreed that they do not want to collect taxes anymore and they want the blackmarkets to thrive.

The real idiot is the guy that ignores what happened in 2009, 2011, and even last year. Bitcoin like any piece of technology is not 100% secure. Encryption can be cracked through packet allocation and brute force methods alike.

So obviously, someone here doesn't know what they are talking about, and it isn't me.

You could try a brute force attack on an encrypted wallet.dat. So use strong passwords to encrypt your wallet with random characters and capital letters, etc. Consider storing your wallet offline and maybe diversify into different client applications. Never send your wallet to anyone if you do forget your private keys!

If the protocols that make Bitcoin secure suddenly became vulnerable (quantum computing?) we would have much bigger problems than our Bitcoin wallets.

Like most things it is as secure as you make it. Gold in your personal vault is safer than gold left in your bay window wouldn't you say? If properly secured bitcoins can not be stolen, period. Someone has misinformed you if you are operating under the belief that somehow the system automatically secures your wealth for you, that is not the case, the user must take the proper precautionary steps.

Yeah sure, where do people come up with stuff like that? Titanic wouldn't sink either. Obama may not know shit about building a website, but I'm pretty sure his NSA masters are already on and probably in this case.

It's not a computing issue, it's a physics issue. Stop giving more credit than is due to the NSA and big corporations. I am pretty certain they haven't stumbled upon free energy yet. You sound like a kid with a monster under his bed and maybe one in his closet too.

The price isn't spiking because of Silkroad 2.0. It is spiking because Bitcoin ATMs are going live and people finally have easier access to Bitcoins.

My EMT has actually been blocked by Interac for purchasing Bitcoins. We have them running scared and I cannot wait, I mean I eagerly look forwards to government intervention and legislation regarding Bitcoin! It will backfire on them in a spectacular way and send the price absolutely soaring!

Government and their "laws" are totally powerless against the mighty Bitcoin! Federali reading this, your move! Game set match!

Google and AT&T are the internet. Thinking otherwise is foolish and ignoring that the majority of the world's traffic, something on the order of 70% travels through fiber and servers owned by those two companies. They own all of that infrastructure. So who said they had to raid your house? Do you honestly think that any of this is actually secure? They tracked down the owner of the Silkroad and raided his house, and he was hiding behind SHA-256 and TOR.

I could tell you in five simple steps how to find everything about an account holder at your ISP. I can get everything from your home address to your phone number with a simple IP trace and server request that gives me a list for the range of IP addresses that you belong to and I merely have to eliminate the ones that are not you. If you have wi-fi in your house it's even easier to simply park outside each house in the range and packet sniffer my way in so I can see directly what you IP address and associate the name and address together... I don't think any of you actually realize how easy it is to get information on you through the internet, I can do all of that without breaking a single law. I can only imagine that they guys that get paid to do that sort of thing can do it as well.

I'm merely an amatuer at this stuff, as I used to have a personal interest in network security and encryption.

Sheesh, go read some of the previous threads. Why do these VERY SAME points always have to raised. Every time someone asks HOW governments will track down each and every wallet, and prosecute, it all suddenly goes very quiet. Just magic, hand wavering, and "ooh worry about that scary all-powerful government out there".

There's a fucking reason the recording industry ass of america stopped suing people. It's a losing proposition, as there's only so much wealth you can extract from one individual target - and that number is generally a lot lower than the cost of the extraction process.

The FBI took all SilkRoad profits in one swoop. Lots of bitcoin, yes? Digital individual targets are easy prey. It's been proven already.

FBI will take your bitcoin, did you pay your tax? Prove it or no bitcoins returned. Did you pay for something your .gov does not like? It's in your transaction history. Now you're in jail and your bitcoins are in the kings coffer. SilkRoad to infinity.

I'm not sure people understand the wisdom in this statement. The bitcoin naysayers may talk bitcoin down, as one might talk down stocks or other investments, but at a certain point they also have to demonstrate very specifically how the bitcoin technology is flawed. Up to this point, the people trying to expose flaws are "insiders" or advocates who are working to fix them. Many flaws and hacks up until now have been based around order volume issues, bitcoin availability, and human issues like fraud/theft, but the technology itself is proving to be viable.

It is hard to understand why people must slam the only viable alternative in the world to fiat currency. A fiat alternative is staring people right in the face. Whoever prints money is the master. A global control structure has been built on making sure the masters retain their position over everyone else. Why not throw a buck at bitcoin, at the very least to spite this global control structure?

By most estimates the creator has less than 5% assuming he didn't lose any back when they were worth pennies. You have to realize that like most things bitcoin was created as a novel proof of concept type idea that just happened to take off. Often times even the innovator doesn't fully comprehend the gravity of their contribution at it's inception. You may as well ask why the creator of Google has 50% of the stock shares. As for the secrecy I can assure you no one wants to be the guy proposing an alternative to the state backed fiat currencies. There is a long history of bad things happening to that guy.

Apparently there is one entity that owns like 30 + % of all the bit coins. Great story posted on ycombinator a while ago on whether bitcoin is a honeypot and the author spoke about the possibility. I can't find it any longer but I did post a link to it on ZH about 2 weeks ago.

I'm not that concerned about bitcoins failure or success. What really concerns me is Fukushima and whether we will be able to eat if things go from bad to worse over there.

It's not a Fiat alternative, because in reality the stupid thing doesn't exist. It has the same issues as with other credit based currencies.

Sure I think it's great you guys are speculating and likely making a whole lot of those paper trinkets off of clueless morons that just want to transact on the Black Markets... What are you going to do when all that valuation disappears? You really think bitcoin will be viable post collapse? How is it going to be worth anything if you can not even turn your damn computer on? You can't connect to the internet?

Some lackey's in a Thai bankster meeting said it was illegal while a legitimate business was before it petitioning for a business license. The actual legality of Bitcoin in Thailand has not been officially decided. Possibly some confusion for not paying the correct bribes... https://bitcointalk.org/index.php?topic=264330.0#post_toc_20

It is interesting to see so many who claim to be for gold and silver unable to escape their conditioning. They are still thinking in terms of "dollars", seeming unaware that is a deprecated term. Thus far, we have enjoyed the cozy phase of emerging technologies. We are now entering a phase where if you are not current you may very well have your entire lifestyle destroyed.

Do the right thing and ask your bullion dealer to accept ethical currencies like Bitcoin instead of "dollars".

I don't really see how people who fight for gold, but against bitcoin, can truly call themselves libertarian. For my money, people could be wanting to pay eachother in framed Bon Jovi pictures, and I wouldn't give a crap. As long as they didn't try yo pass them on to me.

It was actually almost the exact opposite of hyperbole. All I'm saying is that it doesn't matter to me, personally, what you decide to pay eachother in. But lots of posters here go to great lengths to express how awful bitcoin is in every way.

But then, most pseudo-libertarians have lists of "exceptions" - usually items which benefit themselves - to liberrtarianism.

Er, what? I think you need to cut back on that moonweed you smoke. Your argument is completely nonsensical.

You have been touting gold continuously here. I guess if we were to follow your retarded argument to roads end, all those who have lost money in the meantime should be compensated by you. So, are you going to pay up, or are you somehow exempt from your own riduculous argument? I think we all know the answer to that one... or will you at least apologize? Oh, I guess not.

Meanwhile, if you examine my posts, NOT ONCE have I told anyone to explicitly buy fucking BTC. NOT ONCE. dyodd.

No need to drag libertarians (left or right) or gold into it, they know what BitCoin is.

I'll say it again and keep repeating it until "everyone gets it."

If BitCoin were money or currency, the wino on the street corner or the beggar in the market could use it...but they can't, can they? Its getting to the point I'm going to have to call Bitster's "snobs" to get this simple point across...lol...which is not where I'm at regarding BitCoin's utility as a mechanism for moving ones money around.

There is no inherent value (money is only valued by people afterall) in the cloud if you can't access it.

The wino knows this instinctively (oddly enough) and I'm not the least bit interested in subsidizing his internet or device to make it work as "money" when all he's going to do is sell the device for a bottle.